Toronto real estate kicked 2017 off with strong plus-30-per-cent year-over-year price growth, intense bidding wars, and very short average days on market (DOM). Homes in many areas sold almost immediately due to the heated demand and low supply available to buyers. There was a sense of urgency to the market, as buyers feared missing out before prices spiraled ever higher.
However, the region’s housing market took a huge turn in April when the provincial Liberal government introduced the Fair Housing Plan (FHP), a set of 16 measures to address rapidly growing prices and lack of housing stock supply (including rental units).
The FHP resulted in a year-over-year sales decline of 20.3 per cent in May. Active listings skyrocketed 42.9 per cent year over year as a result of reduced demand and uncertainty over price growth. It was a shock to many realtors as the market rapidly shifted from intense bidding wars to dried up demand.
Combined with several policy objectives to cool the housing market (including pending mortgage stress testing), and the Central Bank of Canada increasing its benchmark interest rate to 1 per cent, buyers may be second-guessing whether now is an advantageous time to get into the market. Let’s look at a few of the existing factors behind market trends.
Vancouver’s Regulations Set a Precedent
Many real estate experts like to draw parallels between Toronto and Vancouver; similar activity unfolded in the west coast city in the months following the introduction of their foreign buyer tax in August 2016. That 15-per-cent surcharge resulted in buyers backing out of deals, declining prices and an increase to the average days on market, all of which were witnessed in Toronto following the FHP announcement. Fast forward to today, however, and Vancouver real estate has recovered to record levels despite the foreign buyer tax.
Toronto Prices Haven’t Cooled Much
Demand for Toronto real estate has been growing steadily in since the dip in April, reflected in the most recent monthly reports from the Toronto Real Estate Board. Autumn experienced stronger-than-seasonal sales growth, especially in condos. Condo price growth outpaced that of detached homes in October – an uncommon trend not observed in years – though multi-family housing was still considerably cheaper at an average of $530,041, a 21.8-per-cent increase year over year.
This reversed trend implies that buyers are changing their real estate expectations, and more developers are also implementing a wider variety of choices, as indicated in the Ontario Fair Housing Act (i.e. more three-bedroom units).
Townhomes and semi-detached homes had the second largest price gains in October; with a year over year price growth of 7.4 percent and 6.3 percent, respectively. The average townhouse sold for $629,507 that month, and the average semi-detached home sold for $764,293.
During the same period, the average detached home in the Greater Toronto Area sold for $1,008,207 – a year over year decline of 2.5 per cent. Detached prices declined 0.68 per cent month over month in October making it the only housing type to experience a price decline that month.
However, the market has since shown further signs of cooling, as November prices and sales performed under 2016 levels. Activity fell 13.3 per cent year over year, while the average price softened 2 per cent to $761,757.
A Better Time to Buy
The takeaway is, compared to the blistering activity seen in 2016, now is a good time to buy a home within the GTA, due to less bidding wars, slower price growth, and low interest rates. Some experts are speculating that the dip will be short-lived, because of the job creation in Toronto, and strong economic growth; potentially adding fuel to the housing market.
First-time home buyers can benefit from other options, such as condos, townhomes, and semi-detached homes. These home types are more affordable, and many new-built offer open concept floor plans, making the space feel larger. In fact, buyers typically save when they buy a home on concept, taking advantage of the incentives available (i.e. discounted purchase price, and design studio credits).
All in all, the supply of homes have increased, and the prices have been relatively stable, making it a good time for buyers to take advantage of the dip.